Are publishers not charging enough for video games?
This past Thursday, video game industry veteran Tim Schafer (Monkey Island, Maniac Mansion) and his team at Double Fine games raised more than US$1-million for a new game in less than 24 hours via the grass roots funding service Kickstarter.
The implications for this have been much discussed in the gaming press. There are some who argue Double Fine’s success shows grassroots funding for games can work.
Others believe it shows players are willing to pre-pay for hotly anticipated games still in the development phase (In the Double Fine example, pledges over $15 get a copy of the game). Still others believe this shows that developers have ways of subverting the traditional developer/publisher relationship.
Still, there are several questions that are not being asked: Does Double Fine’s success indicate that gamers are willing to pay more for big games? Or, are developers losing out on lost revenue by not charging enough for their creations?
Last year, I wrote a column about how video games might be too expensive to be true cultural touchstones.
The flipside of this argument is that sometimes developers and publishers are leaving money on the table by charging less than they could for certain types of games. And the result is hurting the industry, or at least limiting the kinds of games it produces.
Right now, there’s an artificial ceiling placed on the price of games. Both Sony Corp. and Microsoft Corp. force publishers to release games at a maximum US$60 price point. And just as there are people who would never think to pay as much as $60 for a video game, there are those who would love to plunk down $70, $90 or even hundreds of dollars to get the kind of experience they’re looking for.
Let’s take a look at the Kickstarter example. In a move to raise funds to cover development costs for their game, Mr. Schafer and his company offered a copy of the game to anyone who was willing to contribute more than $15 to their cause through Kickstarter, a move which would suggest that most people would pay $15 for a copy of the game. The team was hoping it could raise enough to produce the game by going directly to their fans.
As it turned out, thousands of people pledged more than $15. Far more. A couple thousand people have already pledged more than $1,000. One crazy soul has pledged $10,000.
Obviously, some of those who pledged more than the needed $15 were pledging to get some of the creative extras Double Fine was offering (the $10,000 pledge gets to have lunch with Schafer). But even with those bonuses factored in, a lot of the money raised was because certain gamers were more than willing to pay a high price for a game with the DoubleFine pedigree.
Looking at the numbers Double Fine has released — the company said it needed $400,000 to produce the game — had the project been produced in the traditional manner, with the $15 price point set for the game, and considering the number of people who have pledged, the team would be looking to maybe break even.
Double Fine isn’t the only developer that’s getting creative with pricing. The modern “deluxe” edition of games is mostly a way for publishers to skirt the $60 price ceiling and offer fans of a game to pay more to support it. For the most part, fans are happy to pay more for these deluxe copies not necessarily because they feel a crappy book of concept art or cheap dog-tags are worth the extra $10-$20, but because they feel the game itself is worth $10-$20 extra and the included do-dads are just gravy.
You can’t see this more clearly than with the Call of Duty franchise. Activision-Blizzard has strongly implied it thinks the most profitable price for the yearly iteration of Call of Duty is higher than $60. The company has proved this by pushing their more expensive “hardened” editions very strongly on fans. And fans gobbled them up.
Now Activision is attempting to position Call of Duty as a service, something worth a monthly fee (though the company hasn’t announced anything like this yet, it has hinted this is the long term strategy), as a way to charge more for it. And while Call of Duty fans might bemoan this change in direction, the vast majority of regular players clearly value the Call of Duty experience higher than $60 and would be willing to pay more.
Of course, these rules aren’t true for everyone, and higher prices require a consumer who is relatively sure of the kind of product they’re getting and a developer who has a strong reputation. This isn’t to denigrate cheaper games. As Apple has proven, some people simply want cheap, simple experiences. It’s just that when there is so much creativity in pricing at the lower end of the spectrum, it’s a shame the higher end is so locked into a dictated price point.
A NOTE ON JANUARY GAMES SALES
Last week the NPD group released results showing that game sales were down 38% in January this year. I just want to point out, since most stories about the sales drop seem to skip the point, that there was not one single retail release in the entire month of January except for the very last day of the month. Maybe, just maybe, this had something to do with the sales dip.
MAJOR RELEASES THIS WEEK
PlayStation Vita Hardware
The new PlayStation hand-held doesn’t launch officially until Feb. 22, but specific pre-order bundles were released today. The story of the Vita at this point is that it’s a sold piece of tech, some of the best Sony has produced in a long while, and that there are a surprising amount of playable launch games. However, a tepid launch in Japan last fall and an unclear release future make the Vita’s fortunes more cloudy.
Rhythm Heaven Fever (Wii)
Along with Xenoblade, Rhythm Heaven Fever is one of the last major Wii releases before Nintendo launches the WiiU this fall. Also as with Xenoblade, this is a fairly limited release for a relatively niche audience.
Mario and Sonic at the 2012 London Olympic Games (3DS)
The Mario and Sonic sports titles are always big sellers, even if they aren’t critical hits
Twisted Metal (PS3)
Twisted Metal is the car combat sequel to the games that defined the early life of the PS1. It’s unclear at this point if the game will recapture the magic of the late 90s releases.
UFC Undisputed 3 (Xbox 360, PS3)
The UFC games have always done fairly well for publisher THQ, and this release is important to the company as they have surprisingly little cash-on-hand after their U-draw tablet tanked over Christmas.
Authored by Daniel Kaszor
Originally posted on the Financial Post